Maximizing Family-Gifted Funds for US Home Down Payments:

This guide covers US mortgage rules only. Gifting and down payment rules for homes outside the US, including the Netherlands, work differently and are not covered here.

Yes -- family gift money can count toward your down payment on a US mortgage, but the rules for how much, who can give it, and what paperwork you need vary by loan type. Here's how it works across the four major loan programs.

Conventional

Conventional loans backed by Fannie Mae or Freddie Mac generally allow gift funds to cover the entire down payment on a primary residence, provided the gift comes from an eligible donor (typically a relative) and is properly documented with a signed gift letter. Some conventional programs require the borrower to contribute a minimum amount of their own funds when the down payment is below 20%, particularly on two-to-four-unit properties or second homes -- check your specific program's minimum-contribution rule with your lender.

FHA

FHA loans allow gift funds to cover the entire minimum 3.5% down payment. Eligible donors include family members, a fiancé/fiancée, or a domestic partner. FHA does not require the borrower to contribute any of their own funds when the down payment is fully gifted.

VA

VA loans typically require no down payment at all, so gift funds are usually used to help with closing costs rather than a down payment. When gift funds are used, VA lenders still require a paper trail documenting the source and non-repayment nature of the funds.

USDA

USDA loans also typically require no down payment. Gift funds can be used for closing costs and any required reserves. As with VA loans, USDA lenders require documentation confirming the funds are a genuine gift, not a loan.

Comparison Table

Ask a loan officer about gift funds

Common Mistakes to Avoid

• Loan in disguise: If the "gift" has any expectation of repayment, it's treated as a loan, not a gift, and must be disclosed and counted against your debt-to-income ratio.
• Interested-party gifts: Gifts from someone with a financial interest in the transaction (like the seller, builder, or real estate agent) are treated differently and are often restricted or disallowed.
• Undocumented transfers: Moving money without a paper trail -- even a real, no-strings-attached gift -- can cause a lender to flag or reject the funds.
• Large unexplained cash deposits: Depositing cash directly (rather than a traceable bank-to-bank transfer) makes it much harder to document the source, which lenders require.
• Assuming "seasoned" funds remove all documentation needs: Even if gift funds have been sitting in your account for months, lenders can still require the gift letter and donor documentation once they identify the deposit as a gift.

Ask a loan officer about gift funds

Tax Note

General guidance, not tax advice -- confirm with a CPA for your situation. For the borrower, gift funds used toward a home purchase are not taxable income. Any gift-tax reporting obligation falls on the donor, not the borrower, and depends on the gift's size relative to the IRS's annual gift-tax exclusion amount, which is adjusted for inflation most years -- check the current IRS figures for the applicable tax year rather than relying on a fixed number here.